Title Vs. Deed of Trust

by Mallory Malesky

The terms "title" and "deed of trust" are associated with real estate transactions. They're closely related to each other, but are slightly different. The title to your property contains a detailed history of past owners and liens. A deed of trust is a type of security instrument used by your mortgage lender.

Title

Most people tend to think that the title to their property is a tangible document, but that's not really the case. The title is actually a report complied to include the current and past owners of the property, a list of deed transactions, a list of mortgages and other liens on the property. Title abstractors search for the information through recorded property information on public record. From the documents, the abstractor can establish a chain of title. He'll put together a title report, which is basically a chronological listing of the activity taking place in regards to property transactions. Having a free and clear title to property means that there are no liens, defects or other encumbrances filed against it such as a mortgage loan or a tax lien.

Deed Holders

You gained ownership of your property through a deed. The previous owner signed the deed granting his interest in the property to you. The deed was then filed on public record and you are now considered the homeowner. The deed established how you hold the title, or how it's vested. For example, you can hold a property solely as an individual or jointly with someone else like a spouse. The deed is the document that actually transfers and shows evidence of ownership. The title reflects the deed transfers for a piece of property. As a homeowner, you should have the original, or a copy of the deed. You can have a copy of the title report, but it's not a formal document.

Security Instrument

When a mortgage loan is used to finance the purchase of a home, the lender uses the house itself as collateral. If you default on the loan in the future, the lender can foreclose on the property and sell it. To establish their interest in the property, the lender makes their borrowers sign a security instrument. These are either a mortgage or deed of trust depending on what state you live in. The lender's interest in the property is only valid until the loan is paid in full.

Deed of Trust

A deed of trust is a loan document that details the terms and conditions of the loan agreement. It includes the lender's name, borrower's name, loan amount, length of the loan and interest rate information. Additionally, the deed of trust acts to place the property in a trust controlled by a trustee. The trustee will act on behalf of the lender if a foreclosure is necessary. Usually the trustee is not an individual, but rather a title insurance company or escrow management firm. A deed of trust is also filed on public record and will appear on a title report. When the loan is paid in full, the lender issues a release document to be filed that dissolves the trust and evidences the loan as satisfied.